Peer-to-peer payments are a type of digital transaction that allows two people to exchange money directly without the need for a third party. The process is simple: the sender initiates a payment by entering the recipient’s email address or phone number, and the funds are transferred directly from the sender’s account to the recipient’s.
The introduction of peer-to-peer payments has major implications for the remittance market, a sector that is valued at over $500 billion annually. For example, Western Union and MoneyGram success in this space is largely due to their global distribution networks – an advantage no digital company will be able to compete with. On the other hand, peer-to-peer payments will allow for more transparency and security which are features that these companies have long neglected.
What Are the Benefits of Peer-to-Peer Payments?
There are many benefits to peer-to-peer payment platforms. First of all, there is no personal information required when sending money between friends. You can send payments using an email address, phone number or even Facebook account. Another benefit is the speed of transactions between individuals. Whereas traditional bank transfers take five to seven business days to clear, platform users are able to send and receive money within minutes.
On average it takes 5-10 seconds on most peer-to-peer payment apps to transfer money.
Transaction fees are much lower when using peer-to-peer payments than other forms of remittance, like wire transfers or even newer digital services like Paypal. Additionally, sending and receiving money via apps is quick and easy. The process takes seconds, unlike with traditional banks where you need long account numbers for both parties.
What Popular Apps Can Be Used to Transfer Money?
Popular peer-to-peer payment platforms include Circle, Venmo and Facebook Messenger. All of these platforms are free to use for transferring money between friends. For example, with Circle you can send payments in over 26 currencies by using only your email address or phone number. Venmo is owned by PayPal and has been around for a few years longer than Circle. Facebook Messenger’s payment service, which is currently only available in the United States, works in a similar way to Venmo – you need to connect your Facebook account with the app and then you can start sending payments to your friends.
What Are Some of the Best Peer-to-peer Payments Apps?
Here’s a list of some of the most popular peer-to-peer payment platforms:
- Venmo (online banking & PayPal): free to use with no transaction markups and you can withdraw money straight from your bank account. Supported by over 1,000 banks and widely accepted.
- Circle (online banking & Bitcoin): not only a peer-to-peer payments app, but also offers a Bitcoin wallet and allows you to buy and sell the digital currency within the app – very convenient for international money transfers between friends who are using Bitcoin as well.
- Square Cash (online banking & Bitcoin): another Bitcoin-friendly app that doesn’t charge any transaction fees.
- Facebook Messenger (Facebook): only available in the United States, but allows you to send money to your friends on the social media platform. You just need to connect your Facebook account with the app.
- Paypal (online banking): the most popular online payment platform that has recently launched its own peer-to-peer payments service, but you need to be connected to your Paypal account with your bank card to use it.
How Do Peer-to-Peer Payments Work?
Apart from some slight differences in user interface and supported currencies, most of the popular apps work in a similar way. After you have downloaded the app and created an account, you need to add your bank account information. This will allow you to send and receive payments from your friends. To send a payment, just enter the amount you want to send and the email address or phone number of the person you’re sending it to. The app will then take care of the rest, including converting the payment into the correct currency and deducting it from your bank account.
Receiving payments is just as easy. Just provide your friend with your email address or phone number and they can send you a payment directly. The app will notify you when you have received a payment and will show you the amount that has been transferred. If the payment is not in your preferred currency, you can easily convert it using the app’s built-in currency conversion service.
What Are The Benefits of Using Peer-to-peer Payment Apps?
Security is one of the biggest advantages of using peer-to-peer payment apps to transfer money between friends. Since the apps are linked directly to your bank account, you don’t need to worry about providing your friends with your credit card information or other sensitive data.
Another big advantage is that most of the apps are free to use. There are no transaction fees and you don’t need to pay any commission on the money you transfer. This makes sending money between friends much cheaper than using your bank or other online payment platforms.
Safety is yet another benefit of these apps. Since they are linked to your bank account, you don’t need to worry about the safety of your personal information on the app.